The ban has been imposed, the Financial Conduct Authority says, because the firms “failed to ensure that their ARs and individual advisers were adequately supervised and controlled to minimise the risk of mis-selling and the provision of unsuitable advice to consumers.”
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “This is the first time the FCA has used its suspension or restriction powers to punish a firm for serious misconduct. In this case, it is a direct intervention by the FCA in the way the firm runs its business.”
According to McDermott, the FCA intends the sanction as a message of deterrence to the rest of the industry; that the FCA takes systems and controls failings very seriously.
However, the regulator stopped short of imposing a financial penalty, saying: “Were it not for the firms’ financial position, the FCA would have imposed a penalty of £12,589,134 on Financial and £621,583 on Investments.
Brian Galvin, CEO of Financial Ltd and Investments Ltd, the two Financial Group subsidiaries banned said: “We respect the FCA’s findings and regret that we fell short of expectations. We have cooperated fully and have introduced new controls and made significant changes to processes and systems to address the FCA’s concerns.” But, he added: “Our underlying business remains strong and profitable and we will continue to support our members so that they can provide clients with the best possible advice and service.”
According to the Financial Group, Financial Ltd was founded 12 years ago and is responsible for 350 advisers.
“It is based on a unique, transparent fee-based business model which allows members to retain all of their earnings and simply charges a fee based on their turnover.”
In its statement the FCA said the punitive sanction “is intended to have a financial impact on the Group, which generates revenue from its ARs by way of fixed fees”.
The regulator said of the conduct of the two companies between 20 August 2008 and 30 April 2013: “the firms’ failings were directly attributable to the firms’ cultural focus which viewed the ARs and individual advisers, rather than their customers, as the end consumer. This culture created an environment which allowed poor standards of business to continue for a significant period of time”.
Since that period, the firm has, however, improved its processes and, the FCA said: “the group now has a new and more experienced Board in place which has engaged with the FCA and an external consultant to effect material changes to its systems and controls and risk management framework in line with an agreed remedial action plan.”
Both firms are still required to conduct further past business reviews in relation to its pension-switching recommendations and its promotion and sale of UCIS.
“The Financial Group agreed to settle the case at an early stage of the investigation and therefore qualified for a 30% discount. Without the discount the recruitment ban would have been imposed on each of the firms for 6 months,” the FCA said.
